Working Paper: NBER ID: w20665
Authors: Daron Acemoglu; Tarek A. Hassan; Ahmed Tahoun
Abstract: During Egypt's Arab Spring, unprecedented popular mobilization and protests brought down Hosni Mubarak's government and ushered in an era of competition between three groups: elites associated with Mubarak's National Democratic Party (NDP), the military, and the Islamist Muslim Brotherhood. Street protests continued to play an important role during this power struggle. We show that these protests are associated with differential stock market returns for firms connected to the three groups. Using daily variation in the number of protesters, we document that more intense protests in Tahrir Square are associated with lower stock market valuations for firms connected to the group currently in power relative to non-connected firms, but have no impact on the relative valuations of firms connected to other powerful groups. We further show that activity on social media may have played an important role in mobilizing protesters, but had no direct effect on relative valuations. According to our preferred interpretation, these events provide evidence that, under weak institutions, popular mobilization and protests have a role in restricting the ability of connected firms to capture excess rents.
Keywords: Arab Spring; Protests; Political Connections; Stock Market; Egypt
JEL Codes: E02; G12; G3; O11; O43; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger protests in Tahrir Square (P39) | lower stock market valuations for firms connected to the incumbent regime (P34) |
| protests (D74) | drop in market valuations of connected firms (G34) |
| protests do not lead to an increase in stock valuations of rival non-incumbent groups (D72) | reinforcing the idea that protests specifically impact the incumbent's perceived ability to generate rents (D72) |
| social media activity (Z13) | no direct effect on stock market valuations (G19) |